How does insurance work anyway?

When employers or individuals buy insurance they pay a set fee (premium). The health plan pools the premiums it receives and pays health care costs out of the pool, even if a person’s care costs more than the premiums he or she pays. The same concepts are in place when state or federal government purchase coverage on behalf of people enrolled in Medicare, Medical Assistance or MinnesotaCare.

Here are some of the benefits of having health insurance:

  • Spreads risk which increases affordability
  • Covers preventive and routine care
  • Provides access to discounted provider rates
  • Helps manage health and health conditions
  • Assures quality standards are met
  • Limits financial loss

Government oversight

Insurance spreads risk across a pool of premium payers. The more people who pay into the pool, the lower the premium cost is per person. It’s the state’s job to ensure that risk is spread fairly, that health plans offer quality coverage and will have funds available to pay for care. The Minnesota departments of commerce (DOC), health (MDH) and human services (DHS) all oversee health plans. MDH oversees quality standards and HMOs. DOC  reviews and approves all health insurance policies and rates, and audits health plans to ensure they are financially sound. DHS sets rules and regulations for public health care programs.